FARMERS AND MERCHANTS BANCSHARES, INC. HAMPSTEAD, Md., July 22, 2020 (GLOBE NEWSWIRE) -- Farmers and Merchants Bancshares, Inc. (the “Company”), the parent of Farmers and Merchants Bank (the “Bank”), announced that net income for the six months ended June 30, 2020 was $1,879,362, or $0.63 per common share, compared to $2,322,108, or $0.79 per common share, for the same period in 2019. Net income for the three months ended June 30, 2020 was $1,036,055, or $0.35 per common share, compared to $1,225,821, or $0.42 per common share, for the same period in 2019. As previously announced, the Company entered into a definitive agreement on March 6, 2020 to acquire Carroll Bancorp, Inc. Significant one-time costs will be incurred in connection with the acquisition. During the three and six months ended June 30, 2020, the Company incurred $165,096 and $344,920, respectively, of such costs. The table below provides a comparison of the Company’s results with and without the acquisition costs and the prior year.
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||||
| Excluding | Excluding | |||||||||||||||||
| As Reported | Acquisition Costs | As Reported | As Reported | Acquisition Costs | As Reported | |||||||||||||
| Income before taxes | $ | 1,266,626 | $ | 1,431,722 | $ | 1,448,629 | $ | 2,262,849 | $ | 2,607,769 | $ | 2,798,892 | ||||||
| Income taxes | 230,571 | 276,001 | 222,808 | 383,487 | 478,400 | 476,784 | ||||||||||||
| Net income | $ | 1,036,055 | $ | 1,155,721 | $ | 1,225,821 | $ | 1,879,362 | $ | 2,129,369 | $ | 2,322,108 | ||||||
| Earnings per share | $ | 0.35 | $ | 0.39 | $ | 0.42 | $ | 0.63 | $ | 0.72 | $ | 0.79 | ||||||
| Return on average assets | 0.85% | 0.94% | 1.14% | 0.80% | 0.91% | 1.09% | ||||||||||||
| Return on average equity | 8.05% | 8.98% | 10.34% | 7.39% | 8.38% | 9.92% | ||||||||||||
Net interest income for the six months ended June 30, 2020 was $175,192 higher than for the same period in 2019 due to a $42.9 million increase in average interest earning assets to $450.8 million for the six months ended June 30, 2020 as compared to $407.9 million for the same period in 2019, offset by a decline in the taxable equivalent net yield on interest earning assets to 3.44% in the 2020 period from 3.70% in the 2019 period. The net yield declined because the yield on loans and investments decreased 31 basis points to 4.25% for the six months ended June 30, 2020 from 4.56% for the same period in 2019 as a result of the Federal Reserve rate cuts and our origination of $31 million of Paycheck Protection Program (“PPP”) loans that are earning 1.00%. Our cost of deposits and borrowings of 1.07% for the six months ended June 30, 2020 was 4 basis points lower than the cost of 1.11% for the six months ended June 30, 2019. We expect the cost of funds to continue to decline over the remainder of 2020 because we have significantly reduced rates on many of our deposit products. The provision for loan losses totaled $475,000 for the six months ended June 30, 2020, an increase of $462,000 over the same period in 2019, as a result of the economic downturn caused by the COVID-19 pandemic.
Noninterest income increased by $194,599 in the six months ended June 30, 2020 when compared to the same period in 2019 primarily as a result of a $306,769 increase in mortgage banking income and a $210,150 decrease in the write down of other real estate owned, offset by a $197,175 decrease in bank owned life insurance income, a $75,900 decrease in the gain on the sale of SBA loans, and a $41,962 decrease in service charges. Noninterest expense was $443,834 higher in the six months ended June 30, 2020 when compared to the same period in 2019 due primarily to the aforementioned acquisition costs of 344,920 and usual salary and benefit increases of $125,852, offset by a decrease in occupancy, furniture and equipment costs of $21,236. Income taxes declined by $93,297 during the six months ended June 30, 2020 when compared to the same period in 2019 due to lower income before taxes and a higher percentage of tax-exempt revenue.
Total assets increased to $504 million at June 30, 2020 from $442 million at December 31, 2019. Loans increased to $384 million at June 30, 2020 from $359 million at December 31, 2019. The increase in loans was due primarily to the origination of $31 million of PPP loans. Investment in debt securities increased to $73 million at June 30, 2020 from $56 million at December 31, 2019. Deposits increased to $431 million at June 30, 2020 from $377 million at December 31, 2019. The increase in deposits was due to an inflow of funds from depositors who abandoned riskier investments for the safety of a bank and to the aforementioned PPP loans. The majority of PPP loans were made to existing customers, so the loan proceeds were deposited in checking accounts. In many cases, the customer has not withdrawn the PPP funds. The book value of the common stock of Farmers and Merchants Bancshares, Inc. was $17.23 per share at June 30, 2020, compared to $16.63 per share at December 31, 2019.
The COVID-19 pandemic has been wreaking havoc on the U.S. economy. The full impact and its effect on the banking industry will not be known for several quarters, but will be significant. The Bank is providing relief to our borrowers, as needed, including temporary deferral of payments. As of June 30, 2020, the Bank had granted 90-day payment deferrals on 107 loans totalling $109.2 million, which is approximately 30% of the portfolio. The 90-day deferral period has ended for most of the loans and approximately 15 loans totaling $27.8 million will be seeking a second 90-day deferral. In addition, as mentioned previously, the Bank has made a significant amount of PPP loans to customers.
James R. Bosley, Jr., President and CEO, commented “While the COVID-19 pandemic is not over, we are happy to report that our employees are healthy and that most of our borrowers are weathering the storm. Our customers have adapted to the new ways we all have to conduct business. We are pleased to have helped many of our borrowers with payment deferrals and/or PPP loans. Our acquisition of Carroll Community Bank continues to proceed. We expect the closing to occur in the third quarter.”
About the Company
Farmers and Merchants Bancshares, Inc. is a financial holding company and the parent of Farmers and Merchants Bank. The Bank was chartered in Maryland in 1919, and is currently celebrating over 100 years of service to the community. The Bank serves the deposit and financing needs of both consumers and businesses in Carroll and Baltimore Counties along the Route 30 and Route 795 corridors from Owings Mills, Maryland to the Pennsylvania State line. The main office is located in Upperco, Maryland, with seven additional branches in Owings Mills, Hampstead, Greenmount, Reisterstown, and Westminster. Certain broker-dealers make a market in the common stock of Farmers and Merchants Bancshares, Inc., and trades are reported through the OTC Markets Group’s Pink Market under the symbol “FMFG”.
Forward-Looking Statements
The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “will,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Farmers and Merchants Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.
| Farmers and Merchants Bancshares, Inc. and Subsidiaries | |||||
| Consolidated Balance Sheets | |||||
| June 30, | December 31, | ||||
| 2020 | 2019 | ||||
| (Unaudited) | |||||
| Assets | |||||
| Cash and due from banks | $ | 26,517,065 | $ | 6,664,307 | |
| Federal funds sold and other interest-bearing deposits | 476,565 | 2,457,045 | |||
| Cash and cash equivalents | 26,993,630 | 9,121,352 | |||
| Certificates of deposit in other banks | 1,600,000 | 100,000 | |||
| Securities available for sale | 50,595,971 | 36,531,774 | |||
| Securities held to maturity | 22,092,361 | 19,510,018 | |||
| Equity security at fair value | 550,806 | 532,321 | |||
| Federal Home Loan Bank stock, at cost | 611,300 | 376,200 | |||
| Mortgage loans held for sale | 1,473,976 | 242,000 | |||
| Loans, less allowance for loan losses of $3,136,712 and 2,593,715 | 383,769,692 | 359,382,843 | |||
| Premises and equipment | 5,041,743 | 5,036,851 | |||
| Accrued interest receivable | 1,724,532 | 1,019,540 | |||
| Deferred income taxes | 745,539 | 1,036,078 | |||
| Bank owned life insurance | 7,230,699 | 7,145,477 | |||
| Other assets | 2,062,869 | 2,180,644 | |||
| $ | 504,493,118 | $ | 442,215,098 | ||
| Liabilities and Stockholders' Equity | |||||
| Deposits | |||||
| Noninterest-bearing | $ | 85,951,086 | $ | 60,659,015 | |
| Interest-bearing | 345,210,014 | 315,954,299 | |||
| Total deposits | 431,161,100 | 376,613,314 | |||
| Securities sold under repurchase agreements | 11,250,921 | 10,958,118 | |||
| Federal Home Loan Bank of Atlanta advances | 5,000,000 | - | |||
| Accrued interest payable | 309,006 | 346,214 | |||
| Other liabilities | 5,206,034 | 4,843,936 | |||
| 452,927,061 | 392,761,582 | ||||
| Stockholders' equity | |||||
| Common stock, par value $.01 per share, | |||||
| authorized 5,000,000 shares; issued and outstanding | |||||
| 2,991,963 in 2020 and 2,974,019 in 2019 | 29,920 | 29,740 | |||
| Additional paid-in capital | 28,054,158 | 27,812,991 | |||
| Retained earnings | 22,674,059 | 21,568,161 | |||
| Accumulated other comprehensive income | 807,920 | 42,624 | |||
| 51,566,057 | 49,453,516 | ||||
| $ | 504,493,118 | $ | 442,215,098 | ||
| Farmers and Merchants Bancshares, Inc. and Subsidiaries | |||||||||||||
| Consolidated Statements of Income | |||||||||||||
| (Unaudited) | |||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||
| Interest income | |||||||||||||
| Loans, including fees | $ | 4,393,267 | $ | 4,172,235 | $ | 8,715,921 | $ | 8,332,321 | |||||
| Investment securities - taxable | 191,255 | 222,272 | 401,761 | 397,108 | |||||||||
| Investment securities - tax exempt | 154,699 | 143,125 | 298,783 | 281,213 | |||||||||
| Federal funds sold and other interest earning assets | 16,007 | 121,824 | 48,799 | 196,350 | |||||||||
| Total interest income | 4,755,228 | 4,659,456 | 9,465,264 | 9,206,992 | |||||||||
| Interest expense | |||||||||||||
| Deposits | 832,464 | 885,246 | 1,738,663 | 1,660,777 | |||||||||
| Securities sold under repurchase agreements | 39,496 | 28,423 | 77,690 | 53,722 | |||||||||
| Federal Home Loan Bank advances and other borrowings | 12,865 | 11,195 | 12,974 | 31,748 | |||||||||
| Total interest expense | 884,825 | 924,864 | 1,829,327 | 1,746,247 | |||||||||
| Net interest income | 3,870,403 | 3,734,592 | 7,635,937 | 7,460,745 | |||||||||
| Provision for loan losses | 350,000 | - | 475,000 | 13,000 | |||||||||
| Net interest income after provision for loan losses | 3,520,403 | 3,734,592 | 7,160,937 | 7,447,745 | |||||||||
| Noninterest income | |||||||||||||
| Service charges on deposit accounts | 117,658 | 166,115 | 276,213 | 318,175 | |||||||||
| Mortgage banking income | 350,110 | 72,879 | 412,367 | 105,598 | |||||||||
| Bank owned life insurance income | 43,211 | 242,012 | 85,223 | 282,398 | |||||||||
| Unrealized gain on equity security | 4,535 | 6,911 | 13,045 | 14,756 | |||||||||
| Write down of other real estate owned | - | (210,150 | ) | - | (210,150 | ) | |||||||
| Gain on sale of SBA loans | 63,635 | 9,520 | 63,635 | 139,535 | |||||||||
| Other fees and commissions | 29,077 | 35,946 | 59,745 | 65,317 | |||||||||
| Total noninterest income | 608,226 | 323,233 | 910,228 | 715,629 | |||||||||
| Noninterest expense | |||||||||||||
| Salaries | 1,296,278 | 1,309,007 | 2,651,197 | 2,635,790 | |||||||||
| Employee benefits | 359,450 | 314,145 | 806,554 | 696,109 | |||||||||
| Occupancy | 185,394 | 190,543 | 368,546 | 404,963 | |||||||||
| Furniture and equipment | 165,812 | 155,933 | 326,261 | 311,080 | |||||||||
| Acquisition | 165,096 | - | 344,920 | - | |||||||||
| Other | 689,973 | 639,568 | 1,310,838 | 1,316,540 | |||||||||
| Total noninterest expense | 2,862,003 | 2,609,196 | 5,808,316 | 5,364,482 | |||||||||
| Income before income taxes | 1,266,626 | 1,448,629 | 2,262,849 | 2,798,892 | |||||||||
| Income taxes | 230,571 | 222,808 | 383,487 | 476,784 | |||||||||
| Net income | $ | 1,036,055 | $ | 1,225,821 | $ | 1,879,362 | $ | 2,322,108 | |||||
| Earnings per share - basic and diluted | $ | 0.35 | $ | 0.42 | $ | 0.63 | $ | 0.79 | |||||
| Contact: | Mr. James R. Bosley, Jr. | |
| President | ||
| (410) 374-1510, ext.104 |
